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FirstGroup H1 Loss Narrows, Slips To Adj. Loss; Updates On Train Operating Company Contracts

FirstGroup plc (FGROY.PK,FGROF.PK,FGP.L), a provider of transport services in the UK and North America, reported Thursday that its first-half loss before tax was 100.1 million pounds, narrower than loss of 187.1 million pounds a year ago. Loss per share was 8.3 pence, compared to loss of 14.3 pence a year ago.

Adjusted loss before tax was 73.3 million pounds, compared to profit of 19.9 million pounds last year. Adjusted loss per share was 5.3 pence, compared to profit of 1.4 pence a year ago.

Adjusted operating profit plunged to 10.4 million pounds from last year's 88.9 million pounds. The company said adjusted operating profit was ahead of expectations earlier in the year driven by proactive revenue recovery and strong cost control.

Revenue declined to 3.10 billion pounds from 3.53 billion pounds a year ago.

Looking ahead, the company said that whilst the outlook remains uncertain due to the pandemic, visibility for businesses is improving based on current government and customer arrangements and the expected trajectory of service restoration.

Further, the company issued update on train operating company contracts. FirstGroup said it has reached agreement with the Department for Transport or DfT on next steps for the South Western Railway and West Coast Partnership train operating companies, the latter of which comprises Avanti West Coast and the shadow operator for HS2.

These two companies are currently operating under Emergency Recovery Measures Agreements or ERMA which were put in place by the DfT to provide continuity for rail passengers and the industry during the coronavirus pandemic. The ERMA for Avanti is in place to the end of March 2022 and the SWR ERMA is in place to the end of March 2021. Both can be extended by a further half year at the DfT's discretion.

The DfT and FirstGroup have agreed that no termination sum is required for Avanti, which commenced operations in December 2019 and was performing well prior to the pandemic.

Agreement has also been reached for a termination sum for SWR, which requires a further FirstGroup contribution of 33.2 million pounds.

Following agreement of the termination sums, the company said it is now negotiating new directly awarded management contracts with the DfT, which will come into effect at the end of the ERMAs, under which each incumbent train operator will deliver passenger rail services.

The DfT have indicated that these new National Rail Contracts would last to 1 April 2023 for SWR, and to 1 April 2026 for Avanti, each with extension periods of up to two further years at the DfT's discretion.

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